PwC Report Calls for Africa to Invest in Ports to Improve Growth

A report by the PwC, which focuses on the current port infrastructure in sub-Saharan Africa (SSA), calls for further port development to increase overall economic growth. The report, titled, ‘Strengthening Africa’s gateways to trade‘ highlights some of the key challenges the SAA faces in their ability to extract external investment and gain regional economical benefits.

PwC Report Calls for Africa to Invest in Ports to Improve Growth 1

Ports represent a whopping 70% of merchandise trade by value, and 80% by volume. And in Africa, ports are more important than ever, in a country where roads and interconnectedness are major issues. Transportation logistics in its entirety is a complex train of protocols that involves the ability to plan, implement, and control the most efficient method of transporting goods from one place to the other. For the Sub Saharan, the key lies in fixing ports before they can fully build upon other areas of their transportation infrastructure.

“In this report, we show that the global transportation and logistics industry can no longer afford to ignore developments in Africa,” says Dr. Andrew Shaw, PwC Africa Transport and Logistics Leader. “Logistics service providers and ports in particular will continue to play a key facilitator role in trade competitiveness and thus facilitate trade and sustained economic growth across the region.”

Each of these efforts, beginning with the construction of new ports, is a part of a larger plan to transform African trade. However, to ensure financial sustainability, new terminals must be built with end-to-end efficiency and effectiveness. Otherwise, those countries would experience an influx of goods with no proper means of transportation, and supply could easily clog, creating a bottleneck and an influx of other issues for the SSA. This is because port performance has a major impact on the entire transport network.

Lack of effective infrastructure during the creation of new ports can be easily demonstrated by the Port of Mombasa. In 2015, Mombasa, a city off the coast of Kenya, began processing 1m containers for the first time in its history, and saw this as a sign of great strides towards port improvement. At the same time, a railway was being built leading to the port of Nairobi. Though moves were being executed, and pathways were being built, management was so chaotic that little progress was made beyond what the eyes could see. A tender had not been chosen to run the port, and seven senior officials, including the Head of Kenya Ports Authority (KPA), were fired, and corruption ensued.

According to the Economist, what’s happening in Mombasa is representative of what’s happening across the majority of Africa’s existing ports. And the PwC acknowledges this as another obstacle the SSA needs to address in conjunction with the expansion and creation of new ports entirely.

Currently, the majority of African ports are extremely small. The SSA’s largest port is Durban in South Africa, which is one-thirteenth the size of the largest port in the world, Shanghai. And in 2011, a World Bank report found that receiving a shipping container from Africa was twice as time-consuming than receiving one from India and six time more time-consuming than another country receiving one from America. And other figures suggest that port delays increase the overall costs of imported goods by as much as 10%.

According to the PwC, just a 25% improvement in port infrastructure would increase Gross Domestic Product by 2%. World Bank figures show that while the population of SSA is increasing (27 million more people in 2016 versus 2015), the GDP is decreasing ($97 billion less in 2016 than 2015).

“Efficient port operations in Mombasa and Dar es Salaam are critical to increased throughput and evacuation of cargo,” says Kuria Muchiru, Government & Public Sector Partner at PwC Kenya. “East Africa is expected to a be a major transhipment hub on the East Coast of Africa, which will reduce freight costs in addition to contributing to the Belt and Road.”

The report suggests that, beyond adding ports and enhancing management and communication between them, African leaders need to shift the way they view their ports. Rather than consider them money hubs, they should start to consider how short-term investment lead to long-term growth. Building and revitalizing any infrastructure costs money, which can deter current officials from making a move. This inability to see the bigger picture is what continues to make a short-sighted Africa lag behind the rest of the world.

Anne Lawson is a British writer who keeps her eye on business and trending issues that affect us all. She loves to delve into the real story and give us interesting tidbits we might otherwise miss.